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Module 3: Projecting Expenditures

Personal Services

These costs are mainly affected by two controllable factors: number of staff and contracts with collective bargaining units. Accordingly, a locality should project anticipated staffing levels as well as known commitments (such as cost of living increases and salary increments) contained in existing collective bargaining agreements. In most cases, there will be several labor agreements for different types of employees: civil service, fire, police, and non-collective bargaining employees. (OSC’s template has a page that lays these out.)

One benefit of looking at employee contracts is that it will alert local officials to upcoming changes that they might not have fully considered. The locality may, for example, have had a history of 5 percent personal service growth and 14 percent employee benefit growth over the past four years, as shown by the historical data collected. However, if local officials recently signed a contract with one of their bargaining units that commits to a 6 percent a year COLA, their future projections will look different than their historical trends.

Multiyear plans can be useful in conducting future labor negotiations because they show the out-year effects of collective bargaining agreements on the bottom line.

Because personal service is such a large proportion of the budget, and department heads generally do not budget for these costs, local officials may want to go a step beyond looking at broad historical trends and contract changes and calculate a few items that will help in making any programmatic budget changes in the future including:

Turnover and fill rates, including projected vacancies and retirements, average salaries of those
leaving vs. those entering, and how much impact turnover has on fringe benefit costs

Analysis of the total cost of each additional 1 percent salary increase that would be driven by
collective bargaining agreements

Total number of employees vs. full-time equivalents (FTE), and the impact of part-time staff on
benefit rates

Average salary rates by department – useful for calculating the amount it would cost to add
employees, although the net savings from losing them will be affected by factors such as
unemployment benefit payments, vacation-time buy-outs, retirement benefits, etc. (If layoffs
are being considered, this number is also worth calculating.)